Bitcoin tax planning works great with International tax planning.
Bitcoin tax planning is intriguing and powerful because? Here is why.
A Bitcoin is not a currency. Why? A government is needed for a currency to exist. Bitcoin prides itself in no government intervention. So, what is it?
A Bitcoin is a type of private money. You can learn about other private money tax planning and savings on this link. Private money is a contract. My favorite private money is Disney money.
I live in Orange County close to Disneyland. For Christmas, my children loved Disney money with its cute pictures of Donald Duck or Snow White. Disney money is a contract between Disneyland the owner (the bearer) of the paper money.
For example, I prepare your tax return. I get paid $100 in Disney money. For me, it is worth $100 because I can go the Disneyland anytime. However, the value is not fixed. For example, I travel to Nebraska and lose my wallet. I find $100 of Disney money in my jacket. I am hungry, so I go into the cafe. Nebraska is far from Orange County. There my Disney money bought me two eggs, toast, and sausage. It was worth $10.
My loss is a capital loss because my contract with Disneyland is a capital asset. Same with your Bitcoin. It is merely a contract. However, the big questions what about a controlled foreign corporation (CFC) as the owner. International tax planning for the Bitcoin investor has some big tax savings when you use a foreign corporation.
Certain investment income earned by a CFC is taxable to the shareholder. However, the sale of a contract is not one of those types of income. The exception is if you purchased the Bitcoin or sold the Bitcoin to a related person.
Remember to file the IRS information return Form 5471. This is a controlled foreign corporation information return.
Would like to do some more brainstorming? Then please call me, Brian Dooley CPA, MBT for a free brainstorming consultation at 949-939-3414.